China Life to Speed Up Expansion as Profit Growth Outpaces Industry

China Life Insurance Co., the country’s largest insurer by premium income, said it plans to expand its sales force and product range and set up a new fund with search engine provider Baidu Inc. after reporting an industry-beating 18% increase in first-half net profit.

The insurer, which accounts for a fifth of China’s insurance market by premiums, earned a net profit of 12.2 billion yuan ($1.83 billion) during the first six months of the year, according to the company’s filing. This beats the 10% profit growth of the entire insurance industry during the same period, data from the China Insurance Regulatory Commission show.

Although the government tightened oversight of the insurance industry to curb the use of premiums as a way to raise funds outside the formal banking system, China Life’s earnings remained largely unscathed. It is in part because the company is less exposed to short-term investment type products, which regulators began to limit last year. Other smaller insurers, such as Foresea Life and Evergrande Life, have flagged default risks following the regulator’s crackdown on short-term, high-risk policies — specifically, universal life insurance — which left them unable to raise money to fund their liabilities or meet redemptions.

China Life, which specializes in life insurance but has smaller health and accident insurance businesses, earned insurance premiums totaling 346 billion yuan during the first half, an increase of 18.3% year-on-year. In comparison, the insurance industry sold 1.79 trillion yuan in new premiums during the first half of the year, up 26% from a year ago, CIRC said earlier.

New business value, a measure of the future profitability of new policies, jumped nearly 40% from the same period last year to reach 36.9 billion yuan. The jump was even larger last year, when it increased nearly 50% from the first six months of 2015.

At the end of June, the economic worth of China Life as measured by embedded value rose to 698 billion yuan, up from 652 billion yuan at the end of December.

China Life’s total investment income rose 11.5% to 56.7 billion yuan on higher dividend and interest income from its securities investments, the company added.

During the first half of the year, China Life expanded its sales force by 7% from the end of 2016 to 1.9 million people.

“The company will forge ahead for rapid development. It will make more efforts in expanding the sales force while enhancing its quality to bolster morale and improve productivity,” China Life said.

The company will also continue to boost profitability by shifting its focus to annually paid policies and away from single-premium products, in which the insurance plan is paid with a lump sum at the very beginning. During the first half of the year, the value of first-year regular premium policies increased by 11% year-on-year while single premium policies fell by the same amount.

China Life also announced it will set up a fund with Baidu to invest in internet-related projects that include mobile internet, artificial intelligence and internet finance. China Life will contribute 5.6 billion yuan to the fund while Baidu will provide 1.4 billion yuan.

Contact reporter Liu Xiao (liuxiao@caixin.com)